The special consumption tax on imported tourism cars and vans will be raised to 40% as from January 1 2005, and to 80% by 2007. Domestic auto market has become hot, seeing more purchasers who hurriedly buy the vehicle prior to the possible price hike resulted from tax increase.
According to Quach Duc Phap, director of taxation policy department under the Ministry of Finance, the tax increase aims to support the domestic automotive industry.
However, automobile sales has plummeted since the special consumption tax was raised as from early 2004 and sale are expected to fall further if the road map of tax increase is to be implemented.
In fact, high taxes on the automotive industry has discouraged consumption where the rate of domestically produced automobiles in Vietnam is low, equal to 8% of the rate in Thailand.
This has weakened the local automotive industry.